Always important to the corporate treasurer, the value of cash flow forecasting has been underlined repeatedly over the past 12 months. For many, healthy cash surpluses and low interest rates have been replaced by heightened levels of market volatility and extreme uncertainty over short-term funding options. For all, timely and accurate cash flow forecasts are critical to being able to weigh up the situation and make the right call. Automation is essential to understanding a firm’s liquidity position - by improving the speed and accuracy of data gathering – but it can also help corporate treasurers to find and secure the cash resources they need.

The liquidity landscape has certainly changed shape in recent years. Many firms had built up a formidable war chest over the past decade, with a steady growth environment underpinned by quantitative easing and minimal interest rates. This allowed treasurers to take a relatively relaxed view of short-term liquidity management.

But cash mountains have melted away under pressure from any number of forces, both micro and macro economic. At the company level, dividends, buy-backs and M&A may have been considered better use than leaving cash on balance sheet, gradually reducing the treasurer’s room for manoeuvre. At the economic and geopolitical level, a global rise in interest rates – sometimes sharp, sometimes gradual – has marked the end of the era of free money, while spiralling inflation – driven primarily by price turmoil in the energy markets – is raising the spectre of recession.

As a result, both costs and revenues are subject to wild swings, requiring corporate treasurers to deploy all their skills to ensure the firm can pay its way. It is little wonder that enhanced liquidity management and improving cash forecasting capabilities were the top two key priorities over the next 12 months, among respondents to the latest Deloitte Global Treasury Survey ¹.

It is interesting also to note the systems reportedly used by corporate treasurers for cash flow forecasting. Deloitte found that half of firms have no formal systems in place to consolidate cash flow forecasting, often using spreadsheets to gather and analyse the necessary data. At SkySparc, our experience tells us there is potential to further optimise the data-gathering element of cash flow forecasting, through improved system integration, but also to accelerate access to the available liquidity options.

Consolidating data

When considering cash flow forecasting, it clear that the major challenge for most treasurers is assembling accurate data from multiple internal and external sources in a timely fashion. In many cases, cash operations are highly fragmented. This requires the treasurer to consolidate data across multiple types of bank account, some held locally, as well as financial forecasts and cash flows from treasury management systems (TMSs), accounts receivable and payable records from ERP systems, and inputs from other corporate systems such as op ex platforms.

Assembling and assessing such information quickly on a daily basis is essential, but challenging in the fast-moving circumstances currently faced by treasurers, who are likely to be fighting many fires as they struggle to determine daily funding needs. Here, manual processes risk error and delay, leading potentially to funding shortfalls or severely limited - and eye-wateringly expensive – choices.

Assessing the options for sourcing short-term funding is a similarly hard task in uncertain times, with liquidity in shorter supply from once reliable partners. At a very basic level, treasurers need access to market rates and common platforms, such as Bloomberg and Reuters, where liquidity providers are marketing their liquidity resources. But beyond these important but far-from-guaranteed sources, things quickly become more complex and manual.

Bilateral arrangements with relationship banks and other counterparties can be a crucial source of short-term funding in volatile times. But it is not easy to piece together liquidity puzzle at brief notice. Short-term loans may require negotiation by direct message for example, which can require nimble juggling skills, especially if hoping to arbitrage across multiple markets.

Similarly, moving deposits between different types of bank account can yield results, if one has accurate information on the rates and penalties that may be applied by service providers. At the same time, corporate treasurers may need to provide information too, for example reporting flows accurately from operating units to lenders in order to ensure the continued flow of short-term loans.

Improved visibility; enhanced options

Major TMSs have varying capabilities from a cash flow forecasting perspective. They play a crucial part in the treasurer’s visibility over available liquidity resources, but none are designed to consolidate all the data flows needed to act decisively. In many cases, semi-manual workarounds have been found to deal with specific needs, perhaps relying on robotic process automation, but these point solutions do not support the comprehensive market view that treasurers need in unpredictable times such as these.

OmniFi, on the other hand, has been purpose-built and developed to integrate data flows from both traditional and alternative sources, internal and external, and as such is the ideal hub for best-in-class cash flow forecasting.

As a cash liquidity solution, OmniFi has a number of attributes. First, its data integration capabilities include use of open banking APIs to automatically pull in relevant information from banks, ERPs, TMSs, payments platforms and other third-party service providers, including cloud-based tools such as Snowflake, as well as alternative data sources to generate accurate forecasts. This means OmniFi can provide put all the required cash flow data at the fingertips of the treasurer, rather than the treasurer having to waste valuable time collating the data herself.

Second, OmniFi can automate many of the data exchanges involved in sourcing and confirming liquidity transactions. This includes leveraging open banking APIs to aggregate data from multiple banks on interest rates across account type, but can also extend to more sophisticated algorithms that help treasurers to identify and secure the optimal short-term funding mix.

Third, by sitting at the central point of so many data flows, OmniFi is perfectly positioned to validate and improve the accuracy of cash flow forecasts over time. By comparing forecasts with actual cash flows – week on week, month on month – OmniFi can identify any sources of flawed estimates, empowering the treasurer to improve processes and secure an increasingly precise picture of liquidity needs.

The treasurer has long needed a real-time dashboard to enhance cash flow forecasting and short-term liquidity options. But the challenges posed by recent macroeconomic and geopolitical circumstances have pushed this issue back up the corporate agenda. According to Deloitte, 78% of treasury team leaders expected cash flow forecasting to be more automated over the next two to three years. OmniFi is uniquely positioned to answer your cash flow forecasting and liquidity management needs.